FIRST AMENDMENT TO
                     REVOLVING CREDIT AND SECURITY AGREEMENT


       THIS FIRST AMENDMENT TO REVOLVING CREDIT AND SECURITY AGREEMENT
("Amendment"), dated as of April 30, 2002, is by and between BADGER PAPER MILLS,
INC., a corporation organized under the laws of the State of Wisconsin
("Borrower") and PNC BANK, NATIONAL ASSOCIATION ("PNC") as sole Lender and as
Agent under the Credit Agreement referred to below.

                              W I T N E S S E T H :

       WHEREAS, PNC and Borrower entered into a certain Revolving Credit and
Security Agreement, dated as of November 30, 2001 (the "Credit Agreement");

       WHEREAS, Borrower has requested that the Credit Agreement be amended as
set forth herein;

       NOW, THEREFORE, in consideration of the terms and conditions contained
herein, the parties hereto agree as follows:

       1. DEFINITIONS. All capitalized terms used herein and not otherwise
defined shall have the meanings provided for in the Credit Agreement.

       2. AMENDMENT. Subject to satisfaction of the conditions precedent set
forth in Section 3 below, the Credit Agreement is hereby amended as follows:

              2.1 Section 7.6 of the Credit Agreement is hereby restated in its
       entirety to read as follows:

                     "7.6 Capital Expenditures. Contract for, purchase or make
              any expenditure or commitments for Capital Expenditures in any
              fiscal year in an aggregate amount in excess of (i) $4,000,000 for
              Borrower's fiscal year ending December 31, 2002, and (ii)
              $3,000,000 for any other fiscal year."

       3. EXPENSES. Borrower shall pay, upon demand, all reasonable attorneys'
fees and out-of-pocket costs of Agent and Lender in connection with this
Agreement and the agreements, documents and other items contemplated hereunder.

       4. REAFFIRMATION OF GRANT OF SECURITY INTEREST. Borrower expressly
acknowledges and agrees that all collateral, security interests, liens, pledges
and mortgages heretofore, under this Amendment or hereafter granted to Agent
including, without limitation, such collateral, security interests, liens,
pledges and mortgages granted under the Credit Agreement and the Other Documents
and all supplements thereto, extend to and secure all of the obligations of
Borrower to Agent and Lenders, now existing or hereafter arising including,
without limitation, those arising in connection with the Credit Agreement, as
amended by this Amendment, upon the terms set forth in such agreements, all of
which security interests, liens, pledges and mortgages are hereby ratified,
reaffirmed, confirmed and approved.




       5. MISCELLANEOUS.

       5.1 Limited Nature of Amendment. The parties hereto acknowledge and agree
that the terms and provisions of this Amendment amend, add to and constitute a
part of the Credit Agreement. Except as expressly waived or modified and amended
by the terms of this Amendment, all of the other terms and conditions of the
Credit Agreement and all documents executed in connection therewith or referred
to or incorporated therein remain in full force and effect and are hereby
ratified, reaffirmed, confirmed and approved.

       5.2 Conflict. If there is an express conflict between the terms of this
Amendment and the terms of the Credit Agreement, or any of the other agreements
or documents executed in connection therewith or referred to or inciroprated
therein, the terms of this Amendment shall govern and control.

       5.3 Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed to be an original.

       5.4 Representations and Warranties. Borrower represents and warrants to
Agent and Lenders as follows: (A) Borrower has all necessary corporate power and
authority to execute and deliver this Amendment and perform its obligations
hereunder; (B) this Amendment and the Credit Agreement, as amended hereby,
constitute the legal, valid and binding obligations of Borrower and are
enforceable against Borrower in accordance with their terms; and (C) all
representations and warranties of Borrower contained in the Credit Agreement and
all other agreements, instruments and other writings relating thereto are true
and complete as of the date hereof.

       5.5 Governing Law. This Amendment was executed and delivered in Chicago,
Illinois and shall be governed by and construed in accordance with the internal
laws (as opposed to conflicts of law provisions) of the State of Illinois.

       IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first above written.

                                         BADGER PAPER MILLS, INC.


                                         By:        /s/ William H. Peters
                                                    ----------------------------
                                         Name:      William H. Peters
                                                    ----------------------------
                                         Title:     V.P. & CFO
                                                    ----------------------------



                                         PNC BANK, NATIONAL ASSOCIATION,
                                         as Agent and Lender


                                         By:        /s/ Sherry B. Winick
                                                    ----------------------------
                                         Name:      Sherry B. Winick
                                                    ----------------------------
                                         Title:     Vice President
                                                    ----------------------------

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